COMMODITIES MARKET. SUBMITTED BY:- RINKI GROVER ROHIT CHOPRA MENU SHARMA MEGHNA GUPTA SHUBHANGI SHUKLA TUSHAR ARORA VARUN KUMAR. Commodity. A commodity is anything for which there is demand, but which is supplied without qualitative differentiation across a markets.
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A commodity is anything for which there is demand, but which is supplied without qualitative differentiation across a markets.
They are things of value, of uniform quality, that are produced in large quantities by many different producers; the items from each different producer are considered equivalent.
Commodities market essentially represents another kind of organized market just like the stock market and the debt market. However, commodities market, because of its unique nature lends to the benefits of a wide spectrum of people like investors, importers, exporters, producers, corporate etc.
Hedge against price fluctuations – Wide fluctuations in the prices of import or export products can directly affect your bottom-line as the price at which you import/export is fixed before-hand. Commodity futures help you to procure or sell the commodities at a price decided months before the actual transaction, thereby ironing out any change in prices that happen subsequently.
What are the major commodity Exchanges?The Government of India permitted establishment of National-level Multi-Commodity exchanges in the year 2002 and accordingly three exchanges have come into picture. They areMulti-Commodity Exchange of India Ltd, Mumbai (MCX). National Commodity and Derivatives Exchange of India, Mumbai (NCDEX). National Multi Commodity Exchange, Ahmedabad (NMCE).
EXCHANGE MAJOR COMMODITIES TRADED
20 Other Regional Exchanges
Commodities can be traded in:-
Forward contracts market
Futures are standardized contracts among buyers and sellers of commodities that specify the amount of a commodity, grade / quality and delivery location.
Based on hedged positions commodity market players (farmers, processors, manufacturers, exporters) may get easy financing from the banks
Spot markets are those in which the commodity is traded immediately in exchange for cash or some other good.
Spot trading is any transaction where delivery either takes place immediately, or if there is a minimum lag, due to technical constraints, between the trade and delivery.
Global Commodities Market
A forward contract is an agreement between two parties to exchange at some fixed future date a given quantity of a commodity for a price defined today. The fixed price today is known as the forward price.
You decide to buy 100gms of gold futures (which is the minimum contract size) for a certain price. You have to pay a certain amount of margin set by the commodity trading exchange you are trading on, which would be a lower amount than the original price for 100 gms.
The next day the price goes up by Rs. 1000. Rs. 1000 would be credited into your account. The following day it dips by Rs. 500. Rs. 500 is debited from your account. Once you feel that the amount that you have already profited with is not going to change, you can choose to sell the futures.